What a contract of employment should and shouldn't contain

The relationship between employer and employee is regulated in two ways. The most obvious is by contractual agreement – by the terms in an employment contract. The other is by statutory law passed by Parliament, designed to protect the worker.

The rights that are given by statute cannot be reduced by agreement. However, there is nothing to stop an employer trying to change an employee’s impression of his or her rights by including terms in a contract that would not be enforced in a court or tribunal.

It is useful for both an employer and an employee to know what an employment contract should cover, and what, if covered, may not be enforceable.

Statement of particulars of employment

The Employment Act 2002 states that an employer must provide a statement of particulars of employment (also called a principal statement) to an employee within two months of starting work if an employment contract covering all the same points hasn’t already been provided. This protects the employee by making him or her aware of certain terms of employment.

It is, however, not the same as a contract of employment. By providing it, an employer discharges its obligations, but no term within it favours the employer. A reason to use a written contract is to obtain the agreement of the employee to comply with all the items contained in it, some of which do favour the employer.

The statement of particulars must contain the following within a single, clearly written document. If some detail is provided in policy documents (such as a staff handbook), these can be appended, but they are not replacements.

The information that must be provided is:

the employee’s name

the employer’s name

a job title or job description

the date of the start of employment

the amount and frequency of pay

hours of work

holiday entitlement

place of work

collective agreements that affect employment

if the employment is fixed term, or not permanent, when it is expected to end

Some information can either be included within the statement, or referenced. This includes:

If more than one person is employed, there is a fine balance between tailoring the contract to suit a particular employee on the one hand and providing uniformity for fairness on the other hand. So far as possible we advise that as few versions of employment contracts are used as possible.

It is particularly important that some staff are not "preferred" over others by allowing concessions that are not necessary for the job, such as long lunch hours or excessive motoring allowance.

Built in flexibility

Wherever possible, an employer can build in flexibility to the contract. For example, rather than giving a fixed address for the place of work, it is reasonable to have the contract provide for a workplace within a certain range of a fixed place, such as within ten miles from a specific city centre building. Similarly, job descriptions can be non-specific so that staff can be redeployed into new positions without undue difficulty.

Confidentiality

Confidentiality (or non-disclosure) is hard to enforce, but including terms in the employment contract does remind the employee that discussing work outside of the office could have implications for the business and for customers.

Confidentiality could be covered in separate NDA agreements for different types of employee.

Protection of intellectual property

There is little statutory law that protects an employer from damage to intellectual property (IP) by an employee. IP protection therefore needs to be covered comprehensively in an employment contract.

IP includes know-how as well as well as information. While many employers seek to protect customer data or computer code, safeguarding procedures and methodologies is often neglected.

The employee should be reminded that IP created in the course of work belongs to the employer. By law it already does, but some employees may not know this.

The employee should be reminded that all intellectual property remains the property of the employer when employment ends.

There should be restrictions on copying or transferring IP within documents such as an IT policy. These restrictions could be further referenced in the employment contract.

Non-competition

An employer cannot easily prevent a former employee setting up in competition. Provisions against competition are generally contrary to national policy. To be effective they must not be unreasonable. Reasonableness depends on the circumstances. It applies to the type of work, the duration of the restriction and the geographical extent of restriction. A blanket ban of starting a business that operates in the same industry would probably be unfair. A prohibition of soliciting customers for three months might be deemed to be fair.

Policies and procedures

Certain aspects of working do change regularly however. For example, on the introduction of new statutory paternity rights, the employer may extend the rights an employee has in respect of leave.

It is best to leave procedures and matters of business policy out of the employment contract, but instead refer to them (perhaps collectively within the staff handbook). That way, when there is a change, a single policy document can be changed without having to create new contracts with every member of staff. All that is required is that employees are notified of the changes.

The other advantage to this is that by having a single point of reference for all staff, an employer cannot unintentionally treat employees differently.

We would love to hear what you think about this article and how we could improve it. Please do let us know. However, we shan't be able to reply to your specific questions. If you have a question about a document, please contact us.

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